Sec. 111101. Special depreciation allowance for qualified production property
875 words·~4 min read·
/bill/119/hr/1/eh/section-111101A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Section 168 is amended by adding at the end the following new subsection: In the case of any qualified production property— the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 100 percent of the adjusted basis of the qualified production property, and the adjusted basis of the qualified production property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.
For purposes of this subsection— The term qualified production property means that portion of any nonresidential real property— to which this section applies, which is used by the taxpayer as an integral part of a qualified production activity, which is placed in service in the United States or any possession of the United States, the original use of which commences with the taxpayer, the construction of which begins after January 19, 2025, and before January 1, 2029, with respect to which the taxpayer has elected the application of this subsection, and which is placed in service before January 1, 2033.
In the case of property acquired by the taxpayer during the period described in subparagraph (A)(v), the requirements of clauses
(iv)and
(v)of subparagraph
(A)shall be treated as satisfied if such property was not used in a qualified production activity (determined without regard to the second sentence of subparagraph (D)) by any person at any time during the period beginning on January 1, 2021, and ending on May 12, 2025. For purposes of determining under clause (i)— whether such property is acquired before the period described in subparagraph (A)(v), such property shall be treated as acquired not later than the date on which the taxpayer enters into a written binding contract for such acquisition, and whether such property is acquired after such period, such property shall be treated as acquired not earlier than such date. The term qualified production property shall not include that portion of any nonresidential real property which is used for offices, administrative services, lodging, parking, sales activities, research activities, software engineering activities, or other functions unrelated to manufacturing, production, or refining of tangible personal property. The term qualified production activity means the manufacturing, production, or refining of a qualified product. The activities of any taxpayer do not constitute manufacturing, production, or refining of a qualified product unless the activities of such taxpayer result in a substantial transformation of the property comprising the product. The term production shall not include activities other than agricultural production and chemical production. The term qualified product means any tangible personal property. For purposes of subparagraph (A)(iv), rules similar to the rules of subsection (k)(2)(E)(iii) shall apply. For purposes of determining alternative minimum taxable income under section 55, the deduction under section 167 for qualified production property shall be determined under this section without regard to any adjustment under section 56. The term qualified production property shall not include any property to which subsection (k), (l), or
(m)applies. For purposes of subsections (k)(7), (l)(3)(D), and (m)(2)(B)(iii), qualified production property to which this subsection applies shall be treated as a separate class of property. The term qualified production property shall not include any property to which the alternative depreciation system under subsection
(g)applies. For purposes of subsection (g)(7)(A), qualified production property to which this subsection applies shall be treated as separate nonresidential real property. If, at any time during the 10-year period beginning on the date that any qualified production property is placed in service by the taxpayer, such property ceases to be used as described in paragraph (2)(A)(ii) and is used by the taxpayer in a productive use not described in paragraph (2)(A)(ii)— section 1245 shall be applied— by treating such property as having been disposed of by the taxpayer as of the first time such property is so used in a productive use not described in paragraph (2)(A)(ii), and by treating the amount described in subparagraph
(B)of section 1245(a)(1) with respect to such disposition as being not less than the amount described in subparagraph
(A)of such section, and the basis of the taxpayer in such property, and the taxpayer’s allowance for depreciation with respect to such property, shall be appropriately adjusted to take into account amounts recognized by reason of subparagraph (A). The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance— regarding what constitutes a substantial transformation of property, and providing for the application of paragraph
(5)with respect to a change in use described in such paragraph by a transferee following a fully or partially tax free transfer of qualified production property. . Section 1245(a)(3) is amended by striking or at the end of subparagraph (E), by striking the period at the end of subparagraph
(F)and inserting , or , and by adding at the end the following new subparagraph: any qualified production property (as defined in section 168(n)(2)). . The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.